As we approach the 2024 election, tax policy remains one of the most significant factors that could impact individuals and business owners alike. Both major candidates have outlined their tax proposals, which reflect different approaches to managing the economy. Understanding these proposals can help you prepare for how potential changes may affect your financial and business decisions.

Major Tax Proposals from the Candidates

1. Income Tax Rates

• Current Law: The Tax Cuts and Jobs Act (TCJA) of 2017 established reduced individual tax rates, which are scheduled to expire after 2025. The top marginal tax rate is currently 37%. The standard deduction is currently $14.6k for single filers and $29.2k for joint filers.

• Trump: Proposes extending the TCJA’s individual tax cuts, which would keep current tax brackets and standard deductions in place.

• Harris: Plans to let the TCJA tax cuts expire, which would increase the top tax rate to 39.6%, primarily impacting individuals earning more than $400,000 per year. Her plan aims to reduce the standard deduction to about $8.3k for single filers and to $16.6k for joint filers.

2. Corporate Tax Rates

• Current Law: The corporate tax rate was reduced from 35% to 21% under the TCJA, and the Qualified Business Income (QBI) deduction of 20% on small business income was added at the same time.

• Trump: Intends to reduce the corporate tax rate to 20%, and to 15% for those that make products in the U.S. He plans to keep the QBI deduction as is.

• Harris: Proposes raising the corporate tax rate to 28% to increase federal revenues. She plans to let the QBI deduction expire in 2025.

3. Capital Gains Tax

• Current Law: The top tax rate on long-term maximum capital gains is currently 20% for long-term investments.

• Trump: Supports keeping the capital gains tax rate at 20%, continuing the preferential tax treatment for long-term investments.

• Harris: Plans to increase the capital gains tax rate to 28%, preferring to increase tax breaks to workers.

4. Estate Tax

• Current Law: Estate taxes range from 18% to 40% depending on how much the estate exceeds the exemption limit of $13.6 million for individuals and $27.2 million for couples in 2023.

• Trump: Seeks to maintain the current exemption levels, which provide tax relief to wealthy families and business owners who want to pass on their estates without significant tax burdens.

• Harris: Proposes reducing the estate tax exemption to $7 million for individuals and $14 million for couples, similar to pre-TCJA levels. This would result in more estates becoming subject to the estate tax.

Additional Key Tax Proposals

Here are some other tax changes proposed by both candidates that could impact both business owners and individuals:

• Child Tax Credit: The TCJA increased the Child Tax Credit from $1k to $2k per child. Harris proposes expanding it to $6k per child depending on age with a phase out at $200k for single filers and $400k for married couples filing jointly, while Trump plans to maintain the current structure though is said to be considering a $5k per child credit as well.

• Enhanced Premium Tax Credit: This refundable credit helps taxpayers cover the cost of insurance purchased through the Health Insurance Marketplace. Trump plans to let it expire while Harris wants to make it permanent.

• Tip Income: Both candidates want to make tip income exempt from taxation.

• State and Local Tax (SALT): Currently capped at $10k, Harris wants to remove the cap, and Trump wants to either increase or remove it.

• Start-Up Business Incentive: Currently, new businesses can deduct $5k in start-up costs in their first year. Trump plans to keep the policy as is, while Harris wants to increase the deduction to $50k in the first year.

Lesser-Known Provisions to Keep in Mind

In addition to the high-profile tax policies, there are some smaller but important policies that could change, depending on the election results:

• Social Security: Trump wants to exempt benefits from taxation. Harris has not released detailed proposals, but says she wants to strengthen both Social Security and Medicare.

• Home Buyers: Harris has proposed a $25k deduction for first time home buyers in addition to a $10k tax credit. Trump has not proposed anything specific regarding first time home buyers. To increase affordable housing overall, Trump wants to decrease restrictive regulations and make federal land available. Harris wants to make $40 billion available to local governments to build more homes, offer tax incentives to builders, and provide access to federal lands.

• Tariffs on Imported Goods: While Harris supports current tariff policies, Trump wants to increase them 10% worldwide and add a 60% tariff on Chinese imports.

• Student Loans: Harris supports the Biden administration’s student-loan forgiveness plan, and Trump opposes cancellation but backs measures to consolidate income-driven repayment programs.

• Energy & Climate: Trump proposes removing prohibitions on old and gas exploration to reduce fuel costs and repeal the Green New Deal. Harris wants to expand renewable energy policies, subsidize green energy projects, and expand the Green New Deal.

How These Tax Proposals Could Affect You

Whether you're an individual taxpayer or a small business owner, understanding these tax proposals is crucial to making informed financial decisions. Changes to corporate tax rates, capital gains taxes, and personal income taxes could significantly impact your tax liability and future planning.

• For High-Income Earners: Higher tax rates on income, capital gains, and estates could mean an increased tax burden, so planning now could help mitigate future impacts.

• For Business Owners: If corporate tax rates rise, now is a good time to evaluate your tax strategies, especially in areas like pass-through deductions and capital investments.

Preparing for the Future: How We Can Help

Keep in mind that these are proposals and what each candidate wants to do, but many of these policies would require approval by Congress before implementation. However, with so many potential shifts on the horizon, it’s more important than ever to have a comprehensive tax strategy that maximizes your savings and keeps you compliant with new regulations.

Whether you’re looking to understand how potential changes could impact your business or you need help with tax planning, our team is here to help. Contact us today to schedule a consultation and ensure that you’re ready for whatever changes the 2024 election may bring.